The United States and Japan will step up their defence cooperation to deal with the threat from nuclear-armed North Korea as tensions in East Asia remain high, officials from the two allies said on Thursday.

Blame game starts on Qld credit downgrade

The government and opposition are blaming each other for a credit agency's decision to downgrade Queensland's credit rating.

Two days after the Liberal National Party government's first budget, Fitch Ratings Agency downgraded the ratings for Queensland and Queensland Treasury Corporation to AA, from AA+, with a stable outlook.

Fitch warned there could be further credit rating downgrades if the state's fiscal position does not improve or stabilise over the next two to three years.

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"They were put on notice in March that they were going to be watched very closely in terms of how they presented their budget, and how they took the state's fiscal direction forward. That's what Fitch has said."

Fitch says the state's fiscal position and debt matrix have deteriorated over the last four years and a recovery is not expected for at least two more years.

But it also referenced strong measures in the new government's budget to achieve an operating surplus by 2014, mainly through significant cost reductions and to a lesser extent through revenue measures.

Those measures "should support the restoration of the state's fiscal position", Fitch said.

But it added: "Queensland's structurally cyclical revenues are a potential weakness to the speed of fiscal recovery.

"As such, Fitch is expecting a slower recovery process of the state's finances."

In warning of the potential for further downgrades, Fitch noted its forecast of Queensland's revenue growth was below that of the state government.

Economist Saul Eslake said the timing of Fitch's decision was surprising, and noted it had some positive things to say about the budget.

"Maybe the point is that no government, in their mind, could have prevented a downgrading of their assessment of Queensland's credit worthiness," he told ABC radio.

Moody's and Standard and Poor's have left their ratings for Queensland unchanged in the wake of the budget.

Mr Eslake said the markets had already made their own assessment of Queensland's position in recent years.

He doubted Fitch's assessment would change that "unless the markets either come to believe the other two rating agencies will follow Fitch, or if they come to doubt some of the financial projections made in the budget".

Peter Costello, who chaired the commission of audit of Queensland's finances, said Fitch's downgrade was no surprise.

The former federal treasurer said credit agencies have been warning for some time that Queensland's debt level was a problem.

He said Labor had created the debt problem and must take responsibility for the higher borrowing costs Queensland faces.

Mr Costello said it was absurd to suggest the state's debt woes had emerged since the LNP won the election in March.

"Do you think it arose between March of this year and September," Mr Costello told ABC radio on Friday.